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Marketing shakeup rattles Novell shares

Novell Inc. (Nasdaq: NOVL) shares tumbled 2 15/16, or 14 percent, to 17 5/8 Thursday after Banc of America Securities downgraded the stock from a "buy" recommendation to a "market performer" rating.

Analyst Paul Dravis said he cut the stock because "a lack of marketing focus could hurt performance in the near-term."

Dravis undoubtedly was put off by the whirlwind changes taking place in the network software developer's marketing department. After nearly falling completely off Wall Street's radar, CEO Eric Schmidt has turned Novell around in the past year.

But a flurry of management defections and layoffs has stymied Novell's momentum.

Last week, Novell pink slipped 59 marketing employees, or roughly 1 percent of its total workforce, as part of its consolidation of product management and product marketing divisions.

In October, the marketing department took another blow when director Patti Dock left the Provo, Utah firm.

Dock had held her post for only six months before leaving. She joined former marketing director John Slitz and senior vice president Chris Stone as prominent Novell managers who decided to jump ship in recent months.

"The place is a mess because of low morale/lack of direction in Marketing -- Slitz, Stone, Dock now all gone. Novell's messages about digitalMe, DirXML etc. etc. are so confusing -- my CIO wants business reasons, not a technical sell," lamented one Novell customer, who requested anonymity.

Last quarter, Novell beat analysts' estimates, earning $49 million, or 14 cents a share, on sales of $327 million.

First Call consensus expects Novell to earn 17 cents a share in its fourth quarter. Novell will announce its fourth-quarter results Nov. 23.

Its shares moved up to a 52-week high of 31 3/16 in July after falling to a low of 14 1/8 last November.

Eleven of the 12 analysts tracking the stock maintain either a "buy" or "strong buy" recommendation.